10-QPeriod: Q2 FY2015

ENTEGRIS INC Quarterly Report for Q2 Ended Jun 27, 2015

Filed July 31, 2015For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported a strong recovery in its financial performance for the second quarter and first half of 2015 compared to the same periods in 2014. The significant driver of this improvement was the full integration and contribution of ATMI, Inc., acquired in April 2014. Net sales saw a substantial increase, driven by the inclusion of ATMI's revenue, with organic growth also showing positive trends excluding currency fluctuations and acquisition impacts. The company successfully transitioned from a net loss in the prior year's comparable periods to a healthy net income. This turnaround is attributed to higher sales volumes, improved gross margins (partially due to the absence of inventory write-up charges from the prior year's acquisition), and a significant reduction in selling, general, and administrative (SG&A) expenses, largely stemming from lower merger and integration costs. The balance sheet reflects a reduction in long-term debt, while liquidity remains adequate, with sufficient cash and available credit facilities.

Financial Highlights

51 data points
Beta

Revenue

$280.71M

45.6% Gross Margin

Net Income

$24.45M

8.7% Net Margin

EPS (Diluted)

$0.17

Total Assets

$1.70B

Cash & Equivalents

$313.74M

Free Cash Flow

$22.50M

Financial Statements
Beta
Revenue$280.71M
Cost of Revenue$152.62M
Gross Profit$128.09M
R&D Expenses$26.54M
SG&A Expenses$50.27M
Operating Income$39.35M
Interest Expense$9.75M
Net Income$24.45M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)140.31M
Shares Outstanding (Diluted)140.99M

Key Highlights

  • 1Net sales increased significantly year-over-year for both the three-month (12%) and six-month (30%) periods ended June 27, 2015, primarily driven by the ATMI acquisition.
  • 2The company returned to profitability, reporting net income of $24.4 million ($0.17 per diluted share) for Q2 2015 and $39.3 million ($0.28 per diluted share) for the first half of 2015, compared to net losses in the prior year.
  • 3Gross profit margins improved substantially, reaching 45.6% in Q2 2015 and 45.0% year-to-date, up from 35.2% and 38.3% respectively, benefiting from the ATMI contribution and the absence of prior-year acquisition-related inventory charges.
  • 4Selling, General, and Administrative (SG&A) expenses decreased by 39% in Q2 2015 and 14% year-to-date, mainly due to reduced merger and integration costs associated with the ATMI acquisition.
  • 5Long-term debt decreased from $766.8 million at the end of 2014 to $692.0 million at June 27, 2015, driven by debt repayments.
  • 6Cash and cash equivalents decreased from $389.7 million to $313.7 million, primarily due to debt repayments and capital expenditures.
  • 7Engineering, Research, and Development (ER&D) expenses increased due to the inclusion of ATMI's operations and higher activity levels.

Frequently Asked Questions

The primary driver for the substantial increase in net sales is the full-period inclusion of revenues from the acquisition of ATMI, Inc., which was completed in April 2014. While ATMI contributed for part of the prior-year period, its full contribution in the current reporting periods significantly boosted top-line performance.

Entegris has shown a strong turnaround in profitability. The company moved from a net loss in the comparable periods of 2014 to reporting net income of $24.4 million for the three months ended June 27, 2015, and $39.3 million for the six months ended June 27, 2015. This improvement is due to higher revenues, better gross margins, and reduced operating expenses.

Long-term debt has decreased from $766.8 million at the end of 2014 to $692.0 million as of June 27, 2015, due to scheduled debt repayments. While cash and cash equivalents decreased to $313.7 million, the company maintains sufficient liquidity, supported by its cash balance, available credit facilities, and expected cash flow from operations, which management believes is adequate for at least the next twelve months.

The ATMI acquisition has had a mixed impact on operating expenses. Selling, General, and Administrative (SG&A) expenses have decreased significantly year-over-year, primarily due to the absence of merger and integration costs incurred in the prior year. However, Engineering, Research, and Development (ER&D) expenses have increased due to the inclusion of ATMI's operations and higher R&D activity levels.